Some properties blocked from competitive tax auction will go to nonprofits

On Monday, a circuit court judge ruled against a group of developers and real estate agents suing the Kent County Land Bank for blocking tax foreclosed property from auction.

This summer, the land bank coordinated with Kent County government to block more than 40 properties from going to tax auction, where anyone could have bid on them.

Blocking properties from tax auction gave the land bank control over who is allowed to purchase property, and gave the land bank a say in how the property is used. Land bank staff comments at the time indicated properties were also blocked from auction in order to create a revenue stream for the land bank.

State law actually prohibits land banks from acquiring property before tax auction. The land bank-county coordination was done to circumvent that prohibition, and that coordination is what is being challenged in court.

The judge did not dismiss the case. Rather, he ruled that the land bank could sell the properties blocked from tax auction to its preferred buyers. MLive reports that several of the blocked properties will go to a nonprofit developer.

This means that if the for-profit developers and real estate agents win their case, they won't be able to acquire properties they were prohibited from bidding on.

It's worth repeating: The issue here isn't that the properties wouldn't have been sold if the land bank hadn't intervened. The issue is that the land bank is blocking developers and real estate agents from purchasing vacant property in a competitive process. In this case, it appears that the land bank is favoring nonprofit developers over for-profit developers.

There is nothing special about nonprofit developers that makes them more likely to be successful at getting vacant property back to productive use. St. Louis, Mo., provides a darkly comical stream of development failures stemming from land bank and nonprofit coordination.

In his ruling, Judge George Buth also questioned the plaintiffs' standing to sue the land bank. Yet, the people suing the land bank are those who have typically made money by acquiring tax foreclosed property and improving it. If the case ends up being dismissed entirely because the plaintiffs lack standing, who does have standing to sue?

The land bank law passed by Michigan legislators in 2003 has many problems. But the law at least attempted to prohibit land banks from blocking properties from tax auction. The Kent County Land Bank is able to work around that prohibition, and it is likely that other Michigan land banks have, or will.

If the very people harmed by land bank coordination aren't able to sue to stop it, the Legislature should revisit the law.

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